Come work in Vermont - they'll pay you $10,000 to move

Vermont is a beautiful place. We bought some maple syrup there and, according to my son, you can't go far wrong with maple syrup. The thing is, and I don't want to upset all those fans of Vermont's socialist senator, that the Green Mountain State is the back of beyond. And this means:

Vermont, like many states, is suffering from demographic challenges. It has the fourth slowest population growth of any state since 2000. It has the lowest share of its population who are children under 18 (if you exclude the District of Columbia, a “city-state” from the figures). Vermont is also impeccably progressive, has many quaint cities and towns, and is known for natural beauty. None of these factors has driven population growth there. Population growth is not the only metric, but the situation in much of New England is not looking healthy to me, especially northern New England.

So reports Urbanophile, Aaron Renn as he explains that (in an echo of other beautiful places likes Sardinia, Switzerland and Calabria) the state is offering a bung to people who move there:

A new bill signed into law Wednesday will pay remote workers $5,000 a year for two years to make the Green Mountain State their home, as long as their employer is based somewhere else.

So you've got mountains, forest, quaint historic towns, lots of bears and that maple syrup but folk don't move there because, well, it's a long way from Boston, New York or Chicago where the jobs are. Will a little gentle incentive (ten grand's worth of incentive) work by pulling in people who write software, edit textbooks or so or other job not requiring either physical interaction with co-workers or the facilities of a city? Remains to be seen - perhaps some kind researcher might like to look at how well these sorts of schemes work - but it might answer an important question as to whether the people are in the city because the jobs are there or whether they're there for the culture, social life, drugs and sex meaning that's where the jobs go?

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Employment quotas and state monopolies don't improve female empowerment

From a study (Breaking the Glass Ceiling? The Effect of Board Quotas on Female Labor Market Outcomes in Norway) by Marianne Bertrand, Sandra E. Black, Sissel Jensen and Adriana Lleras-Muney:

We document that the women appointed to these boards post-reform were observably more qualified than their female predecessors along many dimensions, and that the gender gap in earnings within boards fell substantially. On the other hand, we see no robust evidence that the reform benefited the larger set of women employed in the companies subject to the quota. Moreover, the reform had no clear impact on highly qualified women whose qualifications mirror those of board members but who were not appointed to boards. Finally, we find mixed support for the view that the reform affected the decisions of young women: while the reform was not accompanied by any change in female enrollment in business education programs, we do see some improvements in labor market outcomes for young women with graduate business degrees in their early career stages; however, we observe similar improvements for young women with graduate science degrees, suggesting this may not be due to the reform. Overall, seven years after the board quota policy fully came into effect, we conclude that it had very little discernible impact on women in business beyond its direct effect on the women who made it into boardrooms.

The case for quotas (other than the 'it's fair' argument) is that they provide for positive female role models and, therefore, act over time to improve the lot of women in the workforce. This would appear to be a questionable assertion - indeed when Nima Sanandaji looked at The Economist's 'Glass Ceiling Index' he found:

...that the rise of the welfare state created jobs for women as well as aided their labor market participation by offering various family-related services. Yet this same system contains disincentives for female ascension in business. One example is high taxes that make it costly to purchase household services (a strategy otherwise used by parents to “buy” time so that they can take care of children as well as focus on their careers); generous benefit systems combined with high taxes that reduce economic incentives for both parents to work full-time and public sector monopolies/oligopolies in female-dominated sectors and parental policies that give women incentive to take long breaks from the working life.

The Nordic welfare state is very good for female participation in the workforce but seems less good at improving female power in that workforce - here's Nima Sanandaji again:

Based on the Economist index, the United States has unusually women-unfriendly work policies while the Nordics have the most women-friendly work policies in the world. However, it is the United States which has the highest rate of women managers amongst all countries included in the Index, while the Nordic countries have a lower share.

Again the findings suggest that open market economies with fewer state monopolies are better for female power even when they are less good for participation. Sanandaji confirms this in showing how within the Nordic countries the levels of female empowerment (indicated by numbers of women managers) vary depending on the extent to which services operate in a competitive market.

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I know it sounds good but will it work? Thoughts on big rises to minimum wages.

Be careful what you wish for - or so they say:

The study, commissioned by the city government of Seattle and published by the National Bureau of Economic Research, found that Seattle’s law incrementally raising its minimum wage — to $13 an hour last year, en route to $15 — resulted in low-wage workers’ earning less money rather than more. This surprised many in Seattle, who had been assured by all the best economists, including Paul Krugman, that such a thing would not come to pass.

The debate about minimum wages is a really important one. And, like all such debates, one that is dominated by righteous assertion - 'how can you not support people being paid a basic minimum, they have to eat' - rather than through considered analysis. It is probably time to take the pain and ask again whether minimum wages work.

The theory (at least as I understand it) tells us that, under all but the rarest of circumstances, if you raise the price of something the demand for that something will decline. All we need to examine is the magnitude of this effect - how quickly or slowly that demand falls as the price rises. It is stretching credulity to breaking point if we suggest that these effects do not apply when the price is the price of an hour's labour. So if we mandate a higher price for certain types of labour the result will be less demand for that labour either through the work concerned being forgone, reduced amounts of the work or else through automation (or, in extremis, through the business that used the labour in question ceasing to exist).

You all know this of course but how come we are all so keen on raising minimum wages (for good and noble reasons about people having a 'living wage' or whatever)? Partly this is because there have been a lot of studies suggesting that minimum wage effects are, at worst, small. The classic - if that's the word - in this genre is a study of fast food restaurants in New Jersey following a minimum wage hike:

Our empirical findings challenge the prediction that a rise in the minimum reduces employment. Relative to stores in Pennsylvania, fast food restaurants in New Jersey increased employment by 13 percent. We also compare employment growth at stores in New Jersey that were initially paying high wages (and were unaffected by the new law) to employment changes at lower-wage stores. Stores that were unaffected by the minimum wage had the same employment growth as stores in Pennsylvania, while stores that had to increase their wages increased their employment.

So much for supply and demand theory! Minimum wages rises increase employment! The problem is that things don't change quickly and reduced employment is built into business plans rather than implemented immediately - employment is sticky (partly because most business managers and especially small businesses really don't like laying folk off).

But there is a middle ground:

Thus, allowing for the possibility of larger job loss effects, based on other studies, and possible job losses among older low-skilled adults, a reasonable estimate based on the evidence is that current minimum wages have directly reduced the number of jobs nationally by about 100,000 to 200,000, relative to the period just before the Great Recession. This is a small drop in aggregate employment that should be weighed against increased earnings for still-employed workers because of higher minimum wages. Moreover, weighing employment losses against wage gains raises the broader question of how the minimum wage affects income inequality and poverty.

What's being suggested here is that in a market like the USA that generates lots of work all that increases in minimum wages do is anticipate rising wages - it's not that there's been a reduction in the numbers of jobs (and it doesn't really matter whether this is 100,000 or 1,000,000) but rather the impact on overall employment. If raising minimum wages doesn't raise unemployment this can only be because the rate at which the economy is generating new demand for labour is greater than or equal to the reduced demand for labour consequential on a higher minimum wage. And in a recession the wage floor might mean a more rapid shedding of labour.

In the UK we have seen surprising labour market resilience - employment has risen despite relatively slow growth and perhaps because of stagnating levels of productivity. A lot of these jobs have been minimum wage jobs but so far the effects of a rising minimum wage (the cutely tagged 'National Living Wage') haven't been seen in overall levels of employment - indeed quite the contrary as record employment and record immigration tell us.



UK wage distribution 2016. Source:ONS

This graph shows the effect of gradual increases in minimum wages. The question is whether the current approach of gradually increasing the minimum wage will continue to protect wage levels for low paid workers without the negative effect of reducing levels of employment for those low paid workers. A minimum wage is no use at all if its consequence is merely more unemployment or fewer hours of work for those low paid workers.

This for me is the reason why the Seattle findings are so important. It's not that we shouldn't consider minimum wages but that the impact of a massive rise in minimum wage is simply to increase unemployment and income among the lower paid. In Seattle, by 2021 the new minimum wage will increase wage costs for employers of minimum wage labour by 60%. It seems to me that the City got itself ahead of its labour market - here are the key findings from the University of Washington study that caused all the fuss (bear in mind that the study found the usual very small effect from the first minimum wage hike in 2015):





It does seem that Seattle has discovered that demand curves slope downwards and we should take lessons from this unsurprising revelation. The best way to improve wages for the least well paid isn't to require that employers pay them more - 18% more in the case of Seattle's 2016 minimum wage rise - but for economic growth to increase demand for labour.

For the UK our ever more surprising ability to create new employment masks these minimum wage effects:

...retail executives concede that sharp increases in the minimum wage have lent urgency to their efforts to use workers more efficiently, by investing in technology that makes many low-skilled jobs obsolete. “On a personal level, we all want to pay our workers more,” said a top executive at one large retailer that has recently announced redundancies. “But there’s going to be unintended consequences from what the government is doing. Automation that used to be too expensive is now cheaper than the people it can replace.”

The question is really how much longer can our economy absorb the workers shed as firms reduce labour levels and introduce automation? So long as the workers leaving Sainsbury or John Lewis can get a job elsewhere with relative ease the rising National Living Wage won't be an issue. But when that rising wage results in job losses the economy can't fill and sees reducing hours worked it becomes counterproductive. Labour's policy of an across the board £10 an hour minimum wage is great politics but such a huge increase in wage bills results in the sort of system shock seen in Seattle. And the people who would feel this shock will be the very low paid workers the policy is designed to help.


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Proper Jobs for Proper Blokes - thoughts on our robot future.

So we're having a cup of tea and a sausage sandwich as we wait out the hour before we get on the plane. And out the window we can see that typical airside scene with a bizarre collection of oddly shaped vehicles buzzing from hangers to planes, from terminals to hangers and on seemingly purposeless but I'm sure important trips elsewhere on the airport. Each one of those little vehicles is controlled by a man (and yes, as far as we could see, they were all men) and by the hanger doors there were other men. All sporting hi-vis clothing, heavy gloves and sensible boot-like footwear.

I don't know how many such men are employed at Leeds Bradford International Airport but they're pretty important to the smooth running of the enterprise - loading stuff on and off planes, waving things about to make sure everything goes in the right direction, hanging about in case there's a fire. A host of good old fashioned unskilled, semi-skilled and skilled manual labour. Proper jobs for proper blokes.

The thing is that, within a decade nearly all of these jobs will be gone. And, just as with mining, steel and shipbuilding, the big losers in this change will be working class men of a certain age. Too far away from retirement to just sack it all and put the feet up, too old and stuck to easily retrain for an unfamiliar, non-manual role. So just like those miners and steelworkers, we'll grow another cohort of resentful, unhealthy and unhappy men. Not just from the airport but men who once drove taxis, trains and buses, men who dug holes in roads, and men who sailed ships.

The future includes a scene where the product of an autonomous factory is loaded (automatically) onto a driverless truck which travels to an automated port to be transferred to a ship without a pilot which will take that product to another automated port, onto another driverless truck to an unmanned warehouse from where it's delivered to your house by a drone. Partly this is wonderful - a fulfilment of man's search to save labour so we can chill out with a beer. Partly it's terrifying, a dystopian, soul-less future without those 'proper jobs for proper blokes'.

We are doing too little thinking about this future. Not just how we make the undoubted economic gains that come from mechanisation, deskilling and robotics but how we share those gains across society without slaughtering the golden geese of our digital future. Some of this thinking is short term - what do we do for those proper blokes doing proper jobs at the airport, what work will there be for a future generation of less intelligent, less skilled men? Some of it is longer term - do we need a different approach to work, tax and responsibility in a world where most tasks are done by robots?

But in framing these thoughts we need to start by dealing with the things which aren't so - like us being more income poor:

Those of us who currently appear to have job security can more than likely look forward to making less in the future than we had once hoped we might. Over the last couple of decades, wages, adjusted for inflation, have scarcely grown throughout a broad range of rich countries, longer in some cases. And this wage stagnation has occurred alongside other distressing trends. The share of income flowing to workers, as opposed to business and property owners, has fallen. And, among workers, there has been a sharp rise in inequality, with the share of income going to those earning the highest incomes increasing in an astounding fashion.

Bits of this paragraph are sort of true (the wage stagnation part, for example) but most of it is nonsense - at least in an article about robots. What is interesting to explore however is this question about capital ownership versus labour. Put simply, this is where we want things to go - we want more people, in some way, to own more of those value-producing robots rather than get the means for consumption either via wages for labour or a benefits system. If those proper blokes wanting proper jobs did so in the context of having a rent income from a share of those robots this might reduce stresses associated with finding enough money to put food on the table, clothes on the kids and roof over the family.

Of course, one of the things with that food, clothing and roof is it will - so long as government keeps its neb out - be a whole lot cheaper than it is now. As an aside this is one of the reasons why the argument about wage stagnation is a bit one-eyed. What costs us £100 to lay on now may, in our automated future, cost only £20 - so even if wages stagnate, we'll all be a whole lot richer for the automation. The problem is that the route to realising those changes lies in removing the most expensive part of the service economy - people. The brake on automation isn't technological but economic - we only keep investing so long as there's a return and if automation destroys the mass market there won't be any automation.

The answer might lie in some sort of redistributive system such as 'universal basic income' but, depending on how it's set, this can only result in a class of de facto drones. A bigger problem is that such an approach doesn't connect income to ownership but rather links it to taxation. In a democracy this risks people voting to take more and more of other people's money. It would be far better to give workers ownership rather than just cash - in trite terms to give everyone a robot rather than a cheque from the government.

Perhaps the answer comes from a hybrid of these two thing. Until recently the UK's private pension system was held up as a fine example of how these things should work and it invested in industry meaning that nearly all British workers had, in one way or another, a stake in the nation. I appreciate that this might be something of a starry-eyed view of the past but it provides a hint of a possible way through the robot problem. After all those robots are capital and that capital has to come from somewhere - why not a fund or funds created by government expressly for the purpose of such investments, for buying robots. With the beneficiaries of the funds' earnings being the UK public and those payments distributed on a 'universal income' basis? Of course, as a good voluntarist, these funds should have what we might call a 'private socialist' structure such as a mutual or co-op and, as such, would be free from the tendency of governments to waste money on infrastructural vanities.

I've just put this here as a thought - I've no idea whether it would be practical (whose making the robots any how - there's no obvious Sirius Cybernetics Corporation) but it gets out from the pretty sterile 'late capitalism' arguments that dominate discussion of our futures. What I do fear isn't the capacity of our systems, ingenuity and innovation to meet (and make better) our future needs but rather a sort of neo-luddism that leads to the fetishing of inefficiency - we see this with organic and biodynamic farming, for example - and the impoverishment that comes from protectionism.

The future, for all its robots, will continue to require people to provide labour but, just as has happened before, the nature of that labour will change. There's a game played by some of trying to guess what jobs there'll be in the future that we haven't thought of yet - it's not just the 'app economy' or the chance to rent out your spare bedroom to visitors but a whole load of other things too. I suspect that we'll still value human service and that, in its widest form, entertainment will be important. And I'm convinced that some of those things we dismiss as 'micky mouse', especially culture things, will become far more valued as skills than the scientific and technical skills we stress today.

In the meantime we've got to work out how we reassure those proper blokes doing proper jobs at the airport that their life isn't going to be crap once the robots take their jobs away. We need to try and avoid the mistakes of the 1970s and 1980s when we assumed the changing economy would provide for those blokes. It might but, it has more chance of doing so if we start thinking about it before they've been given their P45s.

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A story of jobs (and why immigration is important)

We went to Harrogate yesterday afternoon. The sun was shining, it's a nice drive and we like the town. We'd nothing planned beyond a mooch followed by some food and drink. So this is what we did - window shopping (plus some actual impulse purchasing of a funky lamp that clamps onto a shelf) and then an Italian.

Harrogate has been undergoing what I'm sure the Council calls regeneration. At the top of the town centre by the railway there's a new Everyman cinema (interestingly about 100 yards from the existing Odeon) and, as happens these days, a collection of mid-market chain restaurants - CAU (who sell lumps of meat Argentinian-style), Byron Burger, Pizza Express, an Italian I forget the name of and a similarly unmemorable chain bistro. The cinema was having it's invitation only pre-opening shindig - the full opening is on Friday.

We'd originally planned to go to the Yorkshire Meatball Company for its advertised craft ales and artisan meatballs - what's not to like! But on arrival at said restaurant there's a big sign in the window (well actually quite a small sign) saying it's closed for September because the arrival of all these new chain restaurants has led to a staff shortage. Here's a little more from the Yorkshire Meatball Company's website:

Unfortunately, coinciding with the development of our retail products, the huge influx of chain restaurants into Harrogate – most notably those within the new Everyman Cinema development – has not gone un-noticed, as brands more commonly found in larger cities and retail parks now focus on regional expansion. Whilst we always welcome healthy competition, the recent openings have brought with them an unprecedented demand for hospitality staff, particularly kitchen staff, at a time when there is already a known national shortage of skilled chefs. This presents an incredibly challenging recruitment environment for small independents like us. Unfortunately, as a result we’ve had to say a sad goodbye to some; losing a number of our key staff in a relatively short period.

This piqued our interest and, as we continued our wandering around town we began to notice, in window after window, signs saying that there were jobs available. It was pretty clear that, right now, Harrogate is suffering a shortage of retail, waiting and cooking staff. And it struck me that, for all of Harrogate's attractions, it's an expensive place to live if all you've got is the sort of wage you'll get for most of these jobs. In other places ready access by public transport makes it relatively easy to travel a little distance but Harrogate lacks the public transport links that would make it possible to commute. Plus the bus company isn't going to put on a bus just so some workers can travel from Keighley or Harrogate for a job in a restaurant.

Now I'm sure that the situation in Harrogate will settle down, that I'll get my meatballs and craft beer, and most (if not all) of the chain restaurants will thrive on the back of that vibrant cinema crowd. But this situation rather reminds me of Cullingworth's chicken slaughterhouse (the food has to come from somewhere) and its workers.

When we first moved to Cullingworth in 1989, the chicken factory no longer employed many people from the village or indeed from surrounding communities. This was simply because most folk had better paying and less gory employment so didn't need work killing spent hens. So the company imported workers in a minibus - it used to stop just down from our house. These workers came from Doncaster recruited courtesy of an agency there who were willing to sign up the workers and arrange their transport to and from Cullingworth.

Some while later, when I next encountered the workforce of the factory it came as a result of a visit to a house on Lees Moor, about a mile from the village, who had a problem with an overloading and polluting septic tank. This tank served two houses, that of the couple who'd contacted me and another which was rented out. It was the tenants who had (inadvertently I hasten to add) caused the problem with the septic tank. These tenants were eight or ten Romanian women who were employed to kill those spent hens at the chicken slaughterhouse.

And what is the first thing ten women who've been killing chickens for eight hours do when they get home? Have a shower - a long and thorough shower. The septic tank was designed for the regular sort of use from one farm family and simply couldn't take the strain. I can't remember the solution we came up with to resolve the problem but all this tells us that the factory was no longer ferrying workers to and from Doncaster but was, instead, putting up workers from Eastern Europe in rented property nearby. Today, things have moved on with the (still mostly East European) workforce now coming in to work by car and bus from Bradford or Keighley.

It may indeed be the case that Harrogate's hospitality and retail staff shortage will disappear - or at least get under control allowing everywhere to open - but the story of the Yorkshire Meatball Company and the job vacancy signs in shop windows suggests that, as the UK's job market continues to tighten, it will become more and more of a problem. In one respect this will be good news for staff as it will tend to push up wages but there's obviously a limit to that as those costs end up on the price of food thereby risking fewer customers.

Even in Bradford, which may be a fabulous place but isn't a tourism mecca, local business people tell me there's a problem with recruiting good hospitality staff. This isn't because folk are sitting around doing nothing but rather because the sort of people who might in times past have chosen a hospitality job are now getting jobs with 9-5 hours in sales, marketing and financial services. And, just as is the case with killing chickens (and for that matter building houses, cleaning toilets and picking fruit), without immigrant labour these businesses struggle to fill the jobs they produce.

It is for this reason that the sort of UKIP (and sadly Tory right) policy of 'points-based immigration' is a daft idea. Here's Raedwald:

Agriculture and horticulture is utterly dependent on EU migrant labour to get strawberries into our dessert bowls and vegetables to the freezer plant. There have been harvest labour schemes long pre-dating freedom of movement from the new accession states.

None of these would get in under a points system. Nor would young European Erasmus students spending a year in 'intern' type jobs in our hotels and restaurants. Nor would the French Mauritian delivery driver who delivers French goods in London from 'French Click' with care, passion and pleasure.

To agriculture and horticulture we can add hospitality, retail, construction and facilities management - without immigration these things just don't happen. With a points-based system based on "high level skills" these unskilled workers who are essential to our economy simply aren't available. This has nothing to do with whether we're in the EU or even with what that malign body calls free movement. Rather it's about our economy and tells us that if someone arrives in Harrogate or Cullingworth with a job to go to, it doesn't matter whether they're from Keighley or Karachi, Basingstoke or Bucharest they should be allowed to go and do that job.

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Quote of the day - on equalities departments

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In an otherwise pretty standard fare article about inequalities lies this observation about Birmingham's Race Equality Unit. And bear in mind this is an article telling us the we're just as unequal as we used to be:

For example, in 1984 Birmingham City Council set up a Race Equality Unit with the aim of addressing institutional racism and improving access to council services. By 1989 the Unit had 31 staff, including race relations advisers in housing, education, and social services. The Unit’s annual report for that year shows its activities included training, monitoring uptake of services, helping different departments devise race equality schemes, improving access to services (mainly by translating information), and organising outreach events. If you were to include something about community development (helping local community groups to support disadvantaged people) these activities would all be part of the Standard Six – the half a dozen key actions that have dominated equality strategies and policies over the decades.

Put simply we've spent over thirty years mithering on about race equality and levels of black unemployment in Birmingham remain three times higher that the City's overall unemployment rate. All that investment - much of it spent on 'monitoring', on counting minorities - hasn't achieved very much at all. Except provide a well-paid employment for all those equalities monitors, trainers and strategists.

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So let's not talk about the 'jobs miracle', let's talk about welfare instead!

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The latest figures for employment, unemployment and jobs came out yesterday and it's fair to say that they are, without question, good figures:

UK unemployment has fallen to its lowest rate since July 2008, official figures have shown.

The number of jobless people dropped by 76,000 to 1.84 million in the three months to February, the Office for National Statistics said on Friday.

That means the unemployment rate has fallen to 5.6%, in line with forecasts.

Average weekly earnings in the three months to February, excluding bonuses, rose by 1.8% compared with the same period a year earlier.

Growth was slightly lower than the rate in January. When bonuses are included, weekly earnings rose by 1.7%.

The number of people claiming Jobseeker's Allowance in March fell by 20,700 to 772,400, the ONS said.

Add to this record numbers of job vacancies and we should be looking forward to continuing growth in employment plus, as vacancies begin to outstrip the number unemployed, rising real wages.

The New Statesman, which I guess we can describe as part of the 'intelligent left', published an article (by Jonathan Portes) with this headline:

About that Conservative jobs miracle... 

Now you'd expect therefore that the article would discuss - perhaps with some criticism or different analysis - those figures I quote above. But in a long article packed with data not one word address that 'Conservative jobs miracle'. Instead we get Portes' usual, tightly argued position on welfare reform. Or in this case benefits paid to people who are sick and disabled. And as I read it, the jobs miracle (in Portes' view) isn't down to people coming off incapacity benefit - he doesn't provide any indication as to what might have contributed and seems more interested in the budget deficit rather than why so many people have found work.

For me the positioning of an article about welfare as an article about jobs reveals the extent to which the intelligent left is prepared to ignore good economic news and to poke about trying to find something wrong with what's happening out there. I find this all a bit sad. But then the intelligent left has always been a terribly 'glass half empty' bunch.

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Simon Danczuk has a point about immigration and wages - just not a very good one

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Simon Danczuk, the Labour MP for Rochdale and a rare working-class voice in the Labour Party has written a passionate - almost emotional - piece about the effect of immigration on working-class communities:

That many of these job opportunities have all but disappeared to some working class Britons in parts of the country worries me greatly. As a Labour MP, I strongly believe my party should be forever beating a loud drum about the value of work, about instilling a strong work ethic into people and about how character and achievement comes from hard work. My fear is that an increased reliance on cheap migrant labour to drive some sectors in our economy is chipping away at a bedrock of working class pride, allowing a once strong work ethic to drain away and it’s being done with a comfortable and badly misinformed political consensus. 

I understand this - I've asked on many occasions why all of the 400+ jobs killing chickens in my ward are held by immigrants when the rates of unemployment in Bradford remain stubbornly high. How is it that someone will come all the way from Slovakia or Romania to do a minimum wage job in Bradford but that city's home grown unemployed can't or won't take those jobs?

But we do need to recognise the fact that, across the whole economy, immigration has a positive effect on wage levels:

The research looks at the period from 1997 to 2005 and finds evidence of an overall positive impact of immigration on the wages of native born workers, although the magnitude of the effect is modest. Immigration during these years contributed about one twentieth of the average three percent annual growth in real wages.

So we get economic benefit from immigration - every study finds this to be true - but, as with every aspect of economic development, while the economy may benefit there are some losers within that economy:

“Economic theory shows us that immigration can provide a net boost to wages if there is a difference in the skills offered by native and immigrant workers. However, across the whole spectrum of wages it is impossible for everybody to benefit. Some workers will see a gain, others a loss.” 

Danczuk recognises this fact when he comments on the electricians and bar managers undercut by competition from immigrant. And it's important that we recognise how this can effect those working-class communities Danczuk is writing about. However, we have to ask some tricky questions here, with the biggest question being whether we want to forgo the positive economic benefits of immigration for the whole economy because there are some losers? We might also consider those broader societal issues of cohesion and social capital in answering these questions.

We could introduce an essentially protectionist policy - keeping out immigrants that compete with those working-class folk. I say protectionist because it's not really any different from excluding the goods that the cheap labour could make if it stayed in Romania or India. But protectionism produces losers too - we just replace one set for another.

Or we could find a way - some of that much vaunted redistribution - to ensure that the working-class communities in places like Rochdale don't suffer lower wages because of immigration. Partly this is about the level of minimum wages but it's also about taxation and about creating new opportunities for work that lift those communities out from low skill, low wage work.

Simon Danczuk's complaint also reflects a changing world. Those traditional working-class communities get fewer and smaller with each generation, the new jobs aren't unskilled labouring but a service sector jobs. For sure, working in a call centre is probably a pretty soul-destroying job but is it really any different from the dangerous, dirty drudgery that typified the work of past generations? The truth is that native-born folk don't take those bar jobs, labouring jobs and jobs killing chickens because they don't have to. This isn't the demise of the work ethic but simply that there are jobs that pay just as well in warm offices and shops. The decline of traditional working-class jobs can't be laid at the door of the immigrant.

Finally the work ethic (not a concept I'm a special fan of) isn't defined by a litany of pain or suffering but by that thing Danczuk has proved - if you put the effort in, learn and take the opportunities life throws at you, you've more chance of succeeding economically. And that's what that twenty-something Slovakia shows by being prepared to cross a continent to get a shot at a better future.

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On the causes of employment...

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Chris Dillow, everyone's favourite cuddly Marxist, takes Tim Montgomerie to task over unemployment - or rather employment:

My chart shows that since the Tories took office, the number of unfilled vacancies has risen. What's happened is a move along the Beveridge curve, rather than an inward shift in it. This corroborates micro-level evidence that the Help to Work scheme had only small effects in getting people into employment.

The big story since 2010 is not that the unemployed have been filling vacancies faster but rather that there's been an increase in the demand for labour.

And this observation raises some interesting questions, not just about unemployment but about economic policy in general. The link in the quote above is to a commentary from NIESR about the effectiveness of the 'Work Programme', the current government's programme aimed at supporting the transition into work for the unemployed. We should note here that the 'Work Programme' was developed in response to the perceived failings of previous schemes both in terms of effectiveness and also value-for-money.

The implication of Chris's observation is that there is a disconnection between the micro- and macro-level policies. We know this is the case because the money paid to Work Programme providers is on the basis of results rather than activity commissioned in anticipation of targets being met (and we should note this is the central criticism of NIESR's research - it's findings were very early in the programme).

So money is paid to Work Programme contractors on the basis of actual people going into actual jobs - about 250,000 of them (although the permanence of these jobs is a matter of debate). Yet we are told that, in net terms, these programmes aren't effective and that it is factors in the whole economy - the relative price of labour, overall economic growth and so forth - that determine whether or not people leave unemployment for employment.

In fundamental terms what is being said here is that those expensive programmes aimed at supporting people into work are merely an indulgence - the economic policy equivalent of putting go-faster stripes on your Lada.  Except that on the proverbial front-line it simply doesn't feel that way. Even with the incentive of less cash benefits for many long-term unemployed it's pretty difficult to find and, just as importantly, keep work. To try and help everyone understand, I'm going to tell a couple of stories.

The first one is about the young man on a college-based construction training programme. This lad is on work experience at a site and, one morning, the site manager rings up the project worker and says that he keeps turning up late. The project worker thinks this odd - he's always come to college and was pretty reliable. So she goes to see him, as she put it, "to give him the hard word". It turns out that the problem is that the lad's father - also unemployed - doesn't want him to work because he thought it might affect his housing benefit. So the young man left his tools and overalls at a friend's house and, each morning, climbed out his bedroom window and over the back fence so his Dad didn't know he was working.

The second story was told by a programme manager on Manchester's Wythenshawe estate. This manager was curious as to why Wythenshawe had such a high level of male unemployment despite that fact that right next door is the North West's biggest generator of employment - Manchester Airport. So he went to see employers on and near the airport to ask why. And he discovered that the problem was pretty simple - most airport employers had strict security checks and something like two-thirds of the men on the estate had some form of criminal record. They would fall at the first hurdle.

I could relate more stories about the barriers put in the way of the long-term unemployed. I could talk about English Bob who was told to stop going out to get jobs for his fifteen-year-old bottom set pupils and to put them through an English exam he knew they would fail. Or the efforts of much maligned businesses like Poundland to employ people with learning difficulties. Everywhere you go you'll find people - in businesses, in charities, at schools and in public agencies - trying to find ways to get people into sustainable jobs.

And it's hard. Not just because there are few jobs - certainly jobs that suit - but because many of the long-term unemployed are stuck, or addicted or ill. Some really don't want to work at all. Yet when you see a lad off Seacroft who yesterday was cock-of-the-walk on the estate standing nervously twisting his baseball cap as he waits for an interview to go on a joinery course - then you know that the problem isn't 'don't care, won't care, don't want a job'. That lad has been given such a narrow horizon - dingy council flats, petty squabbles where violence is half-a-bottle of vodka away and a world outside that sees only anti-social behaviour, illiteracy and a bad attitude.

So if the Work Programme has got only 70,000 people off that heap and into real work - perhaps for the first time ever - I see that as something to celebrate not something to condemn as failure. I think of the barriers those unemployed people have crossed, I can hear the 'give him a go' conversations with employers and I can picture the frustration of good people as they try again and again to get some hopelessly unreliable person into a job.

Chris Dillow might be right when he says it's falling wages that lie behind the growth in UK employment. But he should also see the human stories too and remember that the micro- stuff matters. These programmes may not make a lot of difference at the aggregate level but down on the ground they provide, every day, a way out for people who might not have made it out on their own.

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The housing crisis that isn't...

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Today there will be much hand-wringing from 'experts' on housing about 'Help to Buy', mostly from people resident in or near London, living in houses worth (theoretically) a great deal more than they paid for them and earning good money. Squeals of concern will be directed at using government loans to help people get onto the 'housing ladder'. There will be so many bubbles it will be like the Boleyn Ground after a win!

It is interesting to note that these squeals weren't directed - for the same reasons - at Ed Miliband's egregious proposal to seize land from people who have chosen not to build houses on it (presumably because that would be uneconomic). And then use government borrowing to subsidise RSLs and councils building "affordable housing".

However that's not the point I'm making here - the point is that we're told by London-dwelling 'experts' that there is a housing crisis (sadly some daft Bradford-based councillors seem to believe the same thing) and, to coin a phrase, 'something must be done'. So - understandably - politicians respond, the propose to do something.

The problem is, however, that there isn't really a housing crisis at all. There's an employment crisis. Here's exhibit one:

Those are three of 59 properties listed at £50,000 or less in Bradford by the local paper. And we could repeat the same story for a host of other cities and towns across the North of England. Yet, in London - even in multiplied deprived East London - you won't find a two bedroomed property for under £200,000 (and that will be somewhere where you daren't go out at night and need three locks on the door). For interest £200,000 will get you a four bedroom detatched house in Bradford.

If housing is so important, so central to everything, why are people leaving Bradford, Liverpool and Hull to take their chances in London (not to mention those trooping there from Romania and points east)? The answer is simple - there aren't any jobs. Or more specifically there are fewer jobs than there are people to take those jobs. As a result more and more people flock to London (and to a lesser extent regional cities such as Leeds, Manchester and Birmingham) because they believe there's a better chance of a job.

We - by which I mean all us folk who sound off about these things, pundits, sort-of-economists, folk who sell mortgages - have chosen to describe this as a housing crisis. And indeed it manifests itself as such - you only have to read Ben Reeves-Lewis on the Landlord Law blog to get this picture. But it is a problem of employment - the dysfunction created by the success of London rather than by the failure of the North.

The challenge facing London - and ipso facto, the UK government given how important London is to the economy - is to provide housing that falls within reasonable aspiration of affordability. And there are three ways to do this - ship people who aren't contributing economically (the young, the old, the unemployed) to places like Bradford, scrap the planning and building controls that hold back development or subsidise housing.

So it really shouldn't surprise people that the government - and all three main political parties - support subsidy since the other options aren't politically acceptable. So let's get used to the bubble - it really is the only choice facing the government (assuming that 'something must be done').

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On the barriers to employment...

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And something of a reminder. But first those barriers:

1. The workings of the welfare system (the ‘benefits trap’), where wages were lower than what could be received from out of work benefits.
2. The low status and low levels of pay of some jobs, making them ‘hard to fill’.
3. A ‘soft’ skills deficit amongst the local workforce ... particularly around motivation, punctuality, reliability and absenteeism

No real surprises there. We know this about employment and have known it for years. Anyone who has worked with people trying to help people into work knows all about these barriers.

So that reminder.

The report looked at the role of migrant workers in the labour markets of Bristol and Hull. It found that in these two cities the arrival of migrants had not created a barrier to the long term unemployed finding a job.

So will someone please tell me why we keep blaming immigrants for our employment problems?

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This really isn't a big surprise

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I'm not making a partisan point here but it shouldn't be a surprise to us that:

The Work Programme is not doing enough to move the hardest-to-help members of society closer to work...

Note the language - 'hardest-to-help' and 'closer to work'. The Work Programme - charged primarily with supporting all those falling off the end of six months with no work - will focus on those cases with the greatest chance of success. And they aren't 'hardest-to-help' or 'furthest from work'.

Think about this for a minute - the limited funds available (we may argue over the size of the pot but it will always be limited) are surely better spent on that 'greatest good for the greatest number' idea?

Which means that:

...those people who are homeless, have mental health issues or drug and alcohol problems...

...will probably miss out.

Maybe, instead of writing letters and trying to browbeat the government into changing the system (to the detriment of somebody else - probably more than one other unemployed person), these large charities might care to spend some of their voluntary income on helping these folk?

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A thought on manufacturing...

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I visited a manufacturer the other day. Part of a multi-national business in the electronics industry. Big plant in Chadderton employing about 360 people.

Of those 360 people, 54 have PhDs and over 70% have a degree of some sort.

Rather makes the point that, even if we have a boom in manufacturing, it is't going to provide jobs for 16 year olds who have scraped five GCSEs.


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An interesting little jobs statistic...

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Back in June 2008 - before the age of austerity, before the cuts, before all those civil servants were cast on the scrap heap, public sector employment in the UK was:

6,019,000 - that's 20.4% of the workforce

Now, after all the austerity, the draconian cuts and Osborne's reign of terror, public sector employment in the UK is:

5,942,000 - that's 20.4% of the workforce

Interesting don't you think?

Source: ONS (table EMP02 here)
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Plain packaging for tobacco will mean hundreds of job losses in Bradford

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The packaging industry is important to Bradford and much of it is geared to supply the tobacco industry. Introducing plain packaging is a big threat to these jobs. Here's Paul Barber from Weidenhammer:
 

“These proposals could have serious implications for our business as tobacco packaging is vital to our turnover. It could cost up to 50 per cent of the jobs here."

And the same goes for Chesapeake which produces packaging for Philip Morris and BAT.

Plus these businesses recognise the agenda of the New Puritans - plain packaging for fags will be followed by plain packaging for booze and crisps.

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Why Vince Cable should be sacked...

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Because he says utter tripe like this:

"I am going to confront the old-fashioned negative thinking which says that all government needs to do to generate growth is to cut worker and environmental protections, cut taxes on the rich and stroke 'fat cats'. I'm completely repudiating the idea that government has to get out of the way. Government has a positive role to play."

Now I am one of those "backward" Tory right-wingers - you know the ones who believe in low taxes, less regulation, smaller government, devolution, localism and getting out of the EU. And yes, I know that more flexible employment laws result in higher employment. Vince should go check out what the ILO has to say on the subject:

EPL is significantly correlated with certain labour market flows across countries, such as labour turnover, inflow into unemployment, duration of unemployment and the share of long-term unemployed. The stricter the EPL is, the lower the labour turnover, the higher the inflow into unemployment, the longer the duration of unemployment and the higher the proportion of long-term unemployment in total joblessness are.

How much clearer do you want it Vince? 

And as for taxes, it's not just taxes on the rich we want cutting, it's taxes on everything. Taxes are a cost to business, the state spends that money badly and Vince's high tax environment reduces liberty and undermines personal choice.

Finally, I can think of no question in Vince's portfolio - not one - to which the answer isn't "government should get out of the way". I've never met a business manager who didn't bemoan the pointless paperwork, the daft regulations, the endless charges levied by some bureaucrat or another - it's these things that we want scrapping. We want to make it easy to start a business, easy to employ someone, easy to import and simple to export.

Vince is just another socialist, another who thinks he knows better than the market yet offers no coherent approach beyond "government has a positive role to play". We had fifty years of social democratic second-guessing - from Wilson, Heath, Heseltine, Blair, Brown and now Cable. Fifty years of getting those guesses wrong. Fifty years with rising levels of structural and long-term unemployment.  Fifty years of asset inflation fuelled by state-sponsored cheap bank lending. Fifty years of that "positive role" for government.

And it didn't work then, it isn't working now and it won't work tomorrow.


That's why Vince Cable should be sacked.


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A question about jobs and immigration...

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An exchange on twitter with Chris Dillow whose stumblings and mumblings are always worth a read, raised the issue of immigration and jobs. A familiar subject most usually heard in the "immigrants come here and steal our jobs" kind of argument - or indeed in cries such as "British Jobs for British Workers".

For what it's worth, I take the view that this argument gets its cause and effect in the wrong order. Immigrants come here because there are jobs. Indeed Chris provided a link to an interesting piece explaining how the immigration/jobs link isn't as plain as it is sometimes presented and it concludes;

"...that there is absolutely no discernible correlation between the areas where new migrants from Eastern Europe settled and changes in the claimant count. More sophisticated analysis shows pretty much the same thing; and using other data sources, and other definitions of migrant, likewise."

So my question is this: why, when UK unemployment levels are high and rising, does economic migration - people moving to the UK to work - persist?

To bring it right down to Cullingworth -  why are all the workers in the chicken factories immigrants?

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More on our dysfunctional labour markets...

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Highest rates of unemployment for a couple of decades and this:

...XpertHR's annual survey of graduate recruitment found that many employers faced barriers when trying to recruit graduates, with poor-quality applicants cited as the biggest problem. Four-fifths (80%) of those surveyed said they faced difficulties recruiting graduates due to a lack of skills, knowledge or the attitudes of the candidates.


Perhaps more worryingly, the second biggest problem employers faced when filling graduate roles was candidates accepting job offers then withdrawing from them, which more than two-fifths (44%) of organisations said they had encountered.

The findings are similar to last week's survey from the Association of Graduate Recruiters, which found that one-third of employers had failed to meet their targets on recruitment in 2010-11 because of a lack of candidates with the right skills.

Something isn't right is it?

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More on the need for benefits reform...

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Some readers may be familiar with Debbie Purdy the 'right-to-die' campaigner but she's been in the news again. This time the campaigning lady was in the Magistrates' Court for non-payment of Council Tax. And, while there she said this:

...benefits officials told her on five occasions that she would get more money if her musician husband Omar Puente stopped working.

“It is outrageous. The benefits system is supposed to be a safety net, not a hangman’s noose,” she said.

The couple’s benefits were recently reviewed and officials told them if her husband was unemployed they would get further benefits such as free council tax, free prescriptions and help with paying the interest on their mortgage. 

Tell me again about having a system that rewards working?

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Which came first - the job or the immigrant?

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In its latest piece of well-researched scaremongering, Migration Watch has been speaking of the number of jobs filled by immigrant workers - and now some government advisors suggest that immigrants have "displaced" UK workers:

The government's official advisers on migration say there is a link between immigration from outside the European Union and job losses among UK workers.

The Migration Advisory Committee said there were 23 fewer UK jobs for every 100 migrants from outside the EU.

The implication of this reporting (and it's the BBC so will have been written carefully) is that British workers are being sacked to make way for immigrant labour. This is, however you want to look at it, both a dangerous statement and utter rubbish.

The problem isn't with British workers, it's with British non-workers. Immigrant labour is (and I've heard this time and time again) more reliable, hard-working and less trouble than native British workers. But more importantly, immigrants are filling those jobs because the native British workers aren't. The jobs come before the immigrants - people don't trog across half a continent at their own expense if there isn't a pretty good prospect of work.

Here in Cullingworth there's a chicken factory. It makes a living (sometimes to the annoyance of residents) killing said birds and shipping them across the UK and Europe. All the work force are Eastern European. Yet Bradford has high rates of unemployment especially among unskilled young men. Killing chickens seems like a job they could do but, I guess, choose not to.

If those British workers took those jobs, the immigrants wouldn't come here to fill them. Rather than running scare stories about immigration, we should be asking why - during such tough times - British workers aren't taking those jobs?

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